The provision allows a taxpayer to take a deduction equal to commercial building energy-efficiency expenditures made by the taxpayer as part of the building’s interior lighting systems, heating, cooling, ventilation and hot-water systems or building envelope. Certification must be obtained to verify that the retrofits are installed as part of a plan to reduce energy costs by 50 percent or more in comparison to a specified minimum standard.

The bill makes some modifications to the 179D incentive. Tribal governments and 501(c)(3)non-profit organizations would be permitted to transfer the deduction to the architect or designer primarily responsible for designing the energy efficiency project. The ability to transfer the deduction is currently available only for public building projects.

Also, under the new provision the 50 percent energy savings certification would be calculated on energy-efficiency improvements above a new baseline reference. The approved modification moves the baseline to a more current standard.

The Commercial Building Tax Deduction was enacted into law as a provision of the Energy Policy Act of 2005 and represented the first performance-based federal tax incentive aimed at energy efficiency improvements in commercial buildings. Congress has acted twice to extend the provision. The last extension was for five years and expired on Dec. 31, 2013.

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March/April 2019

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